Published in the United States by the Ohio State University Press. Published in Great Britain by I.B.Tauris as part of the Second World series.

First published in Russian as Osnovnye idei i fanny organizatsii sei'skokhozyaistvennoi kooperatsii (The basic ideas and organizational farms of agricultural co-operation), Moscow 1927. This was the second edition, revised and supplemented, of a book first published in 1919.

NOTE: Some of the tables in Alexander Chayanov's original Russian text contain arithmetic inaccuracies. Since it has not been possible to check Chayanov's figures from the 1920s, the tables have been left as the author prepared them. In the English edition of the book certain cuts have been made and some tables and diagrams have been omitted.

The paper in this book meets the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources.

Printed in Great Britain.

Contents

Foreword to the Second World Series by Teodor Shanin vii

Introduction by Viktor Danilov xi

Author's Comment xxxvii

1 The Processes and the Concept of Vertical Concentration in the Rural Economy: Peasant Co-operation as an Alternative 1

2 The Theory of Differential Optima and Co-operatives in

the Peasant Economy 24

3 Credit in the Peasant Economy 53

4 Co-operative Credit Societies 72

5 The Peasant Family's Money Economy and its Organization on Co-operative Principles 91

6 The Basic Principles of the Co-operative Organization

of Commodity Circulation 115

7 The Organization of Co-operative Marketing and Reprocessing Enterprises 131

8 Machinery Users' Associations 147

9 Dairy Farming Reprocessing and Cattle-rearing Co-operatives 162

10 Peasant Co-operation for the Purpose of Cattle-rearing 183

vi Contents

11 Co-operative Insurance 187

12 Associations Concerned with Land 196

13 Collective Farms or 'Total Agricultural Co-operation' 207

14 The Basic Principles of Organization of Agricultural Co-operatives 224

The Second World Series

'In the West they simply do not know Russia . . . Russia in its germination.'

Alexander Hertzen

As a publication project The Second World pursues an explicit goal, admits to a bias and proceeds on a number of assumptions. This should be stated at the outset. The series will aim to let the Soviet authors and their historical predecessors in tsarist Russia speak with their own voices about issues of major significance to us and to them. It will focus particularly on their explorations of their own society and culture, past and present, but set no rigid boundaries to these; some of the texts will be more general while others will carry primary evidence, for example, memoirs, documents, etc. Many of the texts have been commissioned to reflect the most recent issues and controversies of Gorbachev's Perestroika.

To bridge differences of culture and experience each of the books will carry a substantial introduction by a Western scholar within the field. Particular care will also be taken to maintain satisfactory standards of translation and editing.

A word about words. A generation ago the term Third World' was coined in its current meaning, to indicate a somewhat imprecise combination of societal characteristics - the post-colonial experience, under-industrialization, relative poverty and the effort to establish an identity separate from the superpowers, the 'Bandung camp'. This left implicit yet clear which were the other two 'worlds'. It was 'us' and 'them', those best represented by the USA and those best represented by the USSR. Much has changed since, giving the lie to crude categorizations. But in research and the media, at the UN and on television, the words and the meanings established in the 1960s are still very much with us. This makes the title of our project

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viii The Second World Series

intelligible to all, yet, hopefully, should also make the reader pause for a moment of reflection.

Turning to the invisible rules and boundaries behind the editorial selection let us stress first the assumption of considerable social continuity between pre-revolutionary and post-revolutionary soci­eties. Present without past is absurd (as is, of course, the treatment of the USSR as simply the Russia of old). Next, to talk of pre-revolutionary Russia/USSR is not simply to talk of the Russians. The country is multi-ethnic, as have been its intellectual achievements and self-evaluations. Yet all the books presented are deeply embedded in Russian language and cultural traditions.. Lastly, we shall aim to show Russia/USSR neither as the 'goody' nor as the 'baddy' but focus attention on the characteristics particular to it.

The Second World is biased insofar as its choice of titles and authors consistently refuses the bureaucratized scholarship and paralytic tongue which has characterized much of the Soviet writing. In other words, it will prefer authors who have shown originality and courage of content and form.

Western perceptions of the Soviet scholarly achievement, especially of its social self-analysis, have been usually negative in the extreme. This was often enough justifiable. Heavy censorship stopped or biased much Soviet research and publication. 'Purges' have des­troyed many of the best Soviet scholars, with whole disciplines closed on orders from above. The Soviet establishment has excelled in the promotion of safe scholars - the more unimaginative and obedient, the faster many made it into the limelight. However, much of the hostile detachment of the Anglo-Saxon scholarship and the media orginated in its own ideological bias, linguistic incompetence and a deeper still layer of mutual miscomprehension. To understand the human experience and thought in a particular social world, one must view it on its own terms - that is, with full awareness of its context - of history, political experience, culture and symbolic meanings. This necessitates the overcoming of stereotypes rooted in one's own experience and a challenge to that most persistent prejudice of all - the belief that everybody (and everything) is naturally 'like us', but somewhat less so (and that the best future mankind can have is to be like us but even more so).

The bafflement of the mainstream of Western scholarship at the dawn of Gorbachev's reforms has accentuated the collective miscomprehensions of Soviet society. On the one hand stand those who see nothing happening because nothing can happen: 'totalitarian­ism' is not open to any transformation from within. On the other hand stand those to whom the USSR is at long last becoming 'like us'. Both views miss the most important point, that Soviet society is

The Second World Series ix

moving along its own trajectory which can be understood only on its own terms. This makes the need to allow this society and its scholars to speak to us in their own voice, an urgent one.

Uniformity and uniformization are false as perceptions of history and wrong as social goals, but so also is any effort at keeping human worlds apart. This is true for international politics, scholarly endeavour and daily life. Half a century ago a Soviet diplomat, Maxim Litvinov, a survivor of the revolutionary generation which was then going under, addressed the League of Nations to say: 'Peace is indivisible'. The World War to follow did not falsify this statement, but amended it. Peace proved divisible but only at the heavy price of human peril. The same holds for knowledge.

Teodor Shanin University of Manchester

Introduction: Alexander Chayanov as a Theoretician of the Co-operative Movement

By Viktor Danilov

Russia had arrived at the 1917 Revolution with a rapidly growing co­operative movement and with the widely accepted view that co­operatives had an important role to play in the country's future. Many people then believed - and with reason - that the co-operative movement would offer to Russian society ways of overcoming the social difficulties which inevitably accompany economic modernization rooted in industrialization. What seemed particularly important for Russia's agrarian society was the opportunity of involvement in a market economy through the extension of co-operation to an enormous mass of small peasant households. Indeed, over a period of some fifteen years the country had seen the growth of a broad network of consumer, credit, agricultural, craft, trade and other types of co-operative. By the beginning of 1902, a total of 1,625 co­operative associations had been registered in Russia: by the beginning of 1912 the numbers were 18,023; and by the beginning of 1915 they had reached 35,200. Their membership, according to approximate calculations, comprised between 11 and 12 million households. Given that a peasant family had on average 5 to 6 members (and it was the rural type of co-operative which decisively predominated) this meant that up to 60 million people, that is one third of the population of the Russian Empire,1 were directly drawn into the sphere of influence of the co-operative movement.

In Russia, as in all other countries, the growth of co-operation did not come about simply 'from below', spontaneously or of its own accord. From the very beginning, the most important factors in its growth were public awareness, the active role of the progressive intelligentsia and - after the revolution of 1905-7 - state support for

xi

xii Introduction

the creation and development of a system of small-scale co-operative credit. It seemed that an answer had at last been found to the most agonizing question of the post-reform period: how to rescue the peasant population of Russia from ruin and proletarianization - from the destruction of the peasantry as a class. Between the 1860s and the 1880s, the narodniki (populist movement) had hoped, with the assistance of an egalitarian type of land commune, to 'keep capitalism out' of the Russian countryside and lead the countryside directly to socialism. Following the example of Robert Owen, they tried to create socialist communes based on politically conscious members of the intelligentsia and farming partnerships of poor peasants. But these naive hopes did not survive the ordeals of life.

The initial Marxist critique of the narodnik illusions was a persuasive one: the commodity-capitalist development of the Russian economy was inevitable; and it occurred as an objective historical process which could not be prevented either by the commune or by the peasant partnership {artel'). Large-scale production based on machinery created new opportunities for the development of society, for the enhancement of its material well-being and culture and for the social emancipation of Man. But at the same time, this kind of production played a powerful role in dictating the transition to a market economy and swept out of its path the natural-patriarchal forms of small-scale production which typified the peasant and craft economies of Russia. The appearance and growth of the proletariat became the main social factor determining the present and future of the country. This was the interpretation from which the Russian Marxists started out, linking their hopes with the proletariat in political struggle for socialism.

However, this common interpretation of the historical process did not entail any unified political strategy or course of action amongst the different schools of Russian Marxism - nor, in particular, between its two main tendencies, the Bolshevik and the Menshevik. The Social-Democratic (Menshevik) tendency directed its political activity mainly into parliamentary channels. It put a great deal of effort into work in trade union, co-operative and cultural-educational organizations. It was from among the Mensheviks that many of the Soviet co-operative leaders emerged, including the head of the Central Association of Consumer Co-operatives in the 1920s, L. M. Khimchuk. (For Lenin, the name of this co-operative activist became a term of description: 'Khimchuk is useful because he knows how to create shops', 'the Khimchuks are doing useful work' and so on.)2 The Bolsheviks did not refuse to undertake practical work in the co­operative system and other 'legal' organizations. However, they regarded this work as something of secondary importance which

Introduction xiii

represented, all in all, merely an attempt to adapt to existing conditions - whereas the main task was to achieve a radical change in existing conditions, through a political and social revolution. This attitude, however, substantially limited the influence of the Bolsheviks on the co-operative movement - both as Marxist theoreticians and as political leaders; and it did so not only during the pre-revolutionary period but also following the 1917 Revolution. So far as Lenin was concerned, it took the entire experience of revolution to enable him fully to appreciate the merits and potential of the co-operative system.

For both the Bolsheviks and the Mensheviks, moreover, the field of co-operative activity was confined before 1917 to consumer societies of industrial workers, since in co-operatives of other kinds there was practically no participation by workers. Furthermore, the peasant and craftsmen's associations were trying to defend what seemed outdated forms of small-scale production - an activity which, in the eyes of the Marxists of that time, seemed to be, if not reprehensible at all events useless. This dogmatic mistake did a good deal of harm and caused a good many difficulties during the period after the Revolution.

By the beginning of the twentieth century, the crisis of Russia's small-scale production both in industry and in agriculture became generally recognized. But, only in the last analysis was it reflected in the growth of the working class; a much more widespread and obvious result of this crisis was the mass pauperization of the population: the non-proletarian impoverishment of the working people, which is familiar in developing societies today. In these conditions, for socialists the defence of small-scale production not only ceased to be useless, but became indispensable. The possibility of fairly effective solutions to this problem by means of co-operatives were by now known and had been tested by the experience of other countries. The figures quoted above on the growth of Russian co­operative associations between 1902 and 1915 demonstrate how strong was the public demand for a social mechanism to protect the consumer and small producer within the market economy, and the extent to which the country had, from this point of view, become ripe for the development of co-operation.

Russian social thought had been powerfully influenced by the idea of co-operation. An enormous number of books, pamphlets and articles in newspapers and journals had been published which actively propagated the ideas of co-operation and described the organization and functioning of the most varied kinds of co-operative associations, together with their economic and social achievements in Britain, Germany, France and other countries. Among the relevant publica­

xiv Introduction

tions of that time, there was hardly a book or article to be found which did not refer to the ideas of Robert Owen as 'the spiritual father of co-operation', or mention the principles of 'the Rochdale society', or the creator of peasant co-operatives F. Raifeizen, the followers of Fourier, the Fabians or other founders of the co­operative movement in the West.

Amidst the torrent of propagandist literature, as well as the descriptive or educational literature, serious works of scientific analysis began to appear relating to the organization of co-operation in Russia and to the theory of co-operation. Among these, a special place undoubtedly belongs to the books by S. N. Prokopovich and M. I. Tugan-Baranovskii, two well-known Russian economists of the beginning of the century. A book by the first-named author appeared in 1913 and provided an analytical picture of the initial stages of development of all forms of co-operative in Russia; and contained at the same time a detailed critique of how they were interpreted by contemporaries. The combination of a serious analysis of actual social and economic processes with a sharply polemical manner of exposition was in general characteristic of S. N. Prokopovich's works; and was also apparent in his book on the theory and practice of the co-operative movement in Russia.

The very definition of co-operation of Prokopovich contained a polemical edge - directed against the collectivist illusions which still survived among the first Russian co-operative activists. For Prokopovich, any co-operative association represented a free and self-managing alliance of members enjoying full and equal rights. It 'does not swallow up the individuality' of its members, but, on the contrary, 'offers full scope for their individual tastes and gifts', 'performing economic operations' relating to production exchange and credit 'on behalf of the members as a whole', but on condition that net income is distributed 'in proportion to the extent to which each member participates in the common work' (and not in proportion to the share capital). It existed for the purpose of increasing the productivity, and income from the work, of its members, for the purpose of lightening the burden and reducing the costs of their 'production and of the management of their, households', which would in the long run make it possible 'to free them from the exploitation of the middleman, the shopkeeper and the money-lender and also make large-scale capitalist production un­necessary'.3

According to this definition, co-operation was not a universal form of alliance. Prokopovich makes this quite clear: 'The only people who can participate in co-operative organizations are those with some economic asset', 'only the economically prosperous elements'.4

Introduction xv

Those who were not economically better off remained outside the ambit of co-operatives. The various types of partnerships of peasants, artisans and workers were regarded as remnants of outdated epochs and formations.5 The modern co-operative system, according to Prokopovich, functioned solely under the conditions of the market economy and in accordance with its laws.

Whilst noting the 'dependence of co-operative forms on economic relationships', Prokopovich came to the conclusion that 'co-operation cannot serve as a weapon in the struggle against the advance of capitalism'.6 Only 'for its own members' did it become an 'instrument of self-defence against the exploitation of capital' - by raising the productivity of, and income from, labour and by ensuring the 'inexpensive acquisition' of necessary products. It was specifically within these limits that co-operatives would wage a struggle 'against the exploitation of working people by the representatives of financial, commodity and productive capital', by turning it from 'the owner of the enterprise . . . into a hired factor of production'.7

This conceptual model was completed by an interesting theoretical argument which was formulated in Marxist language: 'On the basis of one and the same mode of production it is possible for totally different social ways of life to develop'.8 The question therefore was of the formation of a 'co-operative way of life' within the framework of a capitalist economy. And apart from the argument as to who would ultimately be 'hired' by whom as a factor of production, this version of co-operative development was realistic. It was precisely this form which was, by and large, implemented in modern countries, where a capitalist economy includes a significant co-operative sector.

It was within the framework of market co-operation that Prokopovich also set out to solve the problems of agricultural co­operation. Life experience (such as the development of 'steam-powered transport', the growth of taxes, the penetration of market relationships into the countryside and so on) had already confronted the peasants with the task of 'restructuring their economy on new principles', the essence of which lay in the transition 'from the old type of natural economy designed to satisfy the needs of the peasant family to a new, money economy working for the market and making use of the services of the market'.9 But the market inevitably meant 'the appearance of the trader and middleman' as an extremely egoistic intermediary between the peasant and the market. It was precisely this which necessitated a 'combination of the peasants' in co-operatives which would pursue 'both agricultural and broader economic goals'.10

A concrete examination of the development and functioning of different forms of agricultural co-operation - in relation to marketing,

xvi Introduction

supply, reprocessing and, in particular, butter manufacture and credit - enabled Prokopovich to make some extremely pertinent observa­tions concerning the process of the implementation of co-operation in the countryside. He demonstrated first of all that 'the natural character of our peasant economy' and 'the inadequate development of money relationships' within it, represented 'the main obstacle in our country to the development of agricultural co-operation' as a whole. Secondly and for that reason, the process of implementing co­operation involved 'only certain branches of the peasant economy' and this was itself reflected in the regional specialization of co­operative work.11

It is important to note that the difficulties of the co-operative movement in Russia could not be ascribed solely to objective conditions connected with the level of economic development. S. N. Prokopovich pointed very specifically to the administrative and legal barriers (above all to the fact that co-operatives required official sanction). 'The bureaucratic regime which is dominant in our country', so he wrote, 'is extremely antagonistic towards the principles of collective self-determination, of which co-operation is one particular form'.12 His book ends with the assertion that the first precondition for the development of Russian society has become 'the winning of certain political rights - including the right of all citizens to combine freely in co-operatives and engage in autonomous activity'.13

The second of the authors referred to was M. I. Tugan-Baranovskii. A 'legal Marxist' and socialist who belonged to no political party, he devoted a major book, The Social Foundations of Co-operation (Sotsial'nye osnovy kooperatsii, 1916) to the general theory of the co-operative movement and to a generalized account of the development of all its forms and tendencies, not only in Russia but also in other countries. This book had been preceded by an earlier one - Towards a Better Future (K luchshemu budushchemu, 1912) - which was a first attempt to present such a theory. What we are therefore presented with is not a set of piecemeal arguments on a routine topic, but the fruit of serious study carried out over many years. It is important to emphasize this because the book might almost have been specially written for the Revolution; it contained what was virtually a premonition of the agonizing search for the path to a new society, and of the ruinous mistakes and irreparable losses which accompanied this search. We shall see below how, in the country where this book was written and published, it was only towards the end of the 1980s that 'socialism' was able to grasp what N. I. Bukharin (and, of course, not he alone) had begun to grasp in the 1920s; and yet it was something, so it now turns out, which had already been said in 1916 - on the eve of the Revolution.

Introduction xvii

Co-operation, according to Tugan-Baranovskii, was a new form of economic organization which had arisen 'as a result of the conscious efforts of broad social groups to transform the existing [i.e. capitalist - V.D.] economic system in a certain direction'. This 'direction' was that of 'the socialist ideal'.14 Its implementation, even under capitalist conditions, had led people to combine in co-operatives - in economic enterprises whose practical activity differed in no way from that of capitalist enterprises, since they were pursuing 'the private economic advantage of their members' and were doing so 'through the medium of exchange'. A co-operative 'emerges fully equipped with capitalist technology, it stands on capitalist ground and this is what distinguishes it in principle from socialist communes which sought to create an economic organization on an entirely new economic basis'.15

Socialist communes which were set up in the nineteenth century in various countries, were opposed to capitalism by virtue of their very design, and required the initial existence of 'a new Man' or 'of people of exceptional moral qualities'. This in itself limited their influence and ultimately doomed them to failure. Tugan-Baranovskii con­sidered it beyond dispute that although 'such communes are fully capable of surviving by their own efforts under favourable conditions' nevertheless their economies 'not only fail to provide their participants with the enormous advantages of which their sponsors had dreamt but are, as a general rule, worth scarcely more than an economy run by a single individual'.16 A co-operative, on the other hand, must 'trust an individual as he is and must take the social environment as it is'. It 'builds something new ... out of the raw material provided by contemporary society'.17 This novelty is reflected above all in a cardinal change in the 'social-economic nature' of the economic enterprise.

Tugan-Baranovskii perceived the 'non-capitalist nature' of a co­operative enterprise in the fact that it 'never pursues the goal of earning a capitalist profit' although it does make a payment for the (share and loan) capital which it attracts. In a consumer association payment was made 'at the lowest possible rate of interest per share whilst the total net proceeds are distributed between those who collect the goods, the consumers'. However these proceeds 'do not in general constitute income in the economic sense. They represent only that part of the expenditure which has been saved by the members.' Likewise, in the case of a marketing association, the income was distributed 'not in proportion to the share capital' (except in the sense that the lowest possible interest rates were paid on the capital), but in accordance with the quantity of products which were 'made available for marketing' and which had been produced by the

xviii Introduction

association's own labour. Lastly, in the case of a producers' partnership - 'the whole purpose' consisted in the attempt 'to eliminate the capitalist owner by handing everything over to the workers themselves . . . whilst the surplus product which, in the hands of the enterpreneur represented profit, will, by virtue of remaining in the hands of the workers who created the product, become earned income'.18 Thanks to all this, the co-operative became a form of 'self-defence by the labouring classes against encroachment by the hirers of labour'.19

Up to this point, Tugan-Baranovskii's analysis of co-operation did not basically differ from that of Prokopovich. One may suppose that the possibility, as co-operation developed, of the emergence of a multi-layered economy based on the capitalist mode of production was something which Tugan-Baranovskii did not rule out - at least as a particular stage in the historical process. But he did not stop at that. In his view, co-operation represented not only a means of self-defence for the labouring population, but a breakthrough into a future socialist society.

Already before the Revolution, the 'legal' (as opposed to the 'actual') Marxists had grasped something which others would take a very long time to grasp: a socialist economy will inevitably continue to be based on commodity-money relations, since at this stage of historical development it is only the means of production which are socialized, whilst articles of consumption pass 'into private ownership so as to avoid encroaching on private life, which presupposes the right to choose what one consumes' and this is just the same 'as in the case of present-day commodity production'.20 This is all the more important in view of the inevitability of the continuance of hired labour, since 'even in a socialist state the workers would not be the owners of the goods which they produce as well as of the means of production' and would have to be paid 'a definite wage for their labour' just as happens in the case of co-operative enterprises.21

Consumer co-operation, at least insofar as it involved the proletariat, constituted a ready-made part of the socialist economy; and if it extended to the entire population of the country and to the management of the national economy as a whole, it would represent nothing other than a system of collectivism, that is of socialism. Proletarian consumer co-operation, so Tugan-Baranovskii main­tained, would tend towards the complete transformation of the existing social structure and towards the creation of a new economy based on 'the subordination of the entire economic system to the interests of social consumption'; it would 'gravitate towards collectivism'.22 He understood however that the power of the co­operatives themselves was inadequate, and that they represented

Introduction xix

only a part of the workers' movement - existing side by side with trade union organizations and political parties.

The socialist potential of the co-operative movement was, according to Tugan-Baranovskii, confined solely to workers' con­sumer co-operatives. Not only did he deny that there was any socialist potential in petty bourgeois co-operatives (consisting of officials, for example) whose functions were confined to no more than those of adaptation to market conditions. He also denied any socialist potential in peasant or agricultural co-operatives. Their purpose was solely to defend the interests of 'the small peasant farmer' - the interests of 'his self-preservation', since capitalist conditions constituted a threat to 'the entire economic existence of the peasant as an independent farmer'.23

Co-operatives, so Tugan-Baranovskii believed, did a great deal to defend and improve the peasant economy and even did a great deal 'for its profound transformation'. However, this transformation was confined to the organization and expansion of market relations, the surmounting of the prevalent isolation of the small-scale peasant household and its involvement 'within a powerful web of social ties'. He recognised that 'the new type of peasant economy which is being created by co-operation' was becoming 'socially regulated'; it was being given 'the opportunity to make use of the gains and advantages of a large-scale economy' and 'to compete against large-scale capitalist enterprises'.24 But nevertheless, the idea of transforming the peasant economy itself and of organizing its output on socialist principles was categorically rejected. This was partly connected with the fact that in all countries, agricultural co-operation embraced 'mainly the middle and rich peasants. The least well-off peasants, who are close to the proletariat, are economically too weak to participate in co-operatives in significant numbers.'25 This, as Tugan-Baranovskii rightly observed, may explain the conservative, often plainly reactionary political attitudes of agricultural co-operatives in Germany, Belgium and France at that time.26 But the main thing, so he maintained, was that co-operatives defended and strengthened the position of the peasant precisely as a small-scale individual producer, and did not create any collective economy. Let us take, for example, the following argument:

The peasant household, even when drawn into co-operative organizations, continues to be a small-scale entity in the sense that the co-operative fabric - no matter how many ramifications it may develop and no matter how stable or complex it may become - is still based on the individual peasant household headed by an independent peasant farmer who manages the

xx Introduction

farm at his own risk and peril. Not only does co-operation represent no threat to the independence of the peasant household: it makes the peasant household more secure by making it more successful and by improving its technical standards. One must therefore reject, in the most categorical fashion, any idea that co-operation leads to the concentration of the peasant economy or thereby prepares the ground for socialism27

Only in a producers' partnership did the possibility exist for 'the complete absorption of individual agricultural production by social production', but neither in agriculture nor indeed in industry, as Tugan-Baranovskii noted, was this 'in practice' widespread at the time of the book's publication.28

It is strange to read such a defense of what came to be called collectivization in the writing of a 'legal' Marxist who inclined to a position which was reformist and not in the least revolutionary. The dogmatic interpretation of the organization and functioning of especially large-scale advanced production solely in the image and likeness of factory or machine-powered production, based on the collective labour of large groups of workers, was at that time almost universal - as was the simple equation of socialism with collectivism. We should emphasize, however, that Tugan-Baranovskii's theoretical models were in no sense practical recommendations. On the contrary, when we study them we find the following clarification:

contemporary socialism in no sense requires the destruction of peasant ownership or the replacement of the labour of the peasant on his field by the tilling of the land by large social groups. Most representatives of contemporary socialism . . . recognise that even within the framework of a socialist state, the peasant household may be preserved, owing to the substantially different conditions of production in agriculture and in industry. By not making demands for the destruction of peasant ownership, socialists may also appear as defenders of peasant co-operation which undoubtedly supports the peasant economy.

One begins to understand why Tugan-Baranovskii, although he denied that there was any socialist potential in peasant co-operation, was nevertheless able, as a socialist, to advocate its further development. Co-operation as a whole was 'a creative, constructive force'; it contained 'a spirit which draws mankind onto new paths and which creates new social forms'. Moreover it was already 'building a

Introduction xxi

new society within the framework of the one which now exists'.30 Such were the general ideas of Tugan-Baranovskii's book. In a country which was becoming ripe for social revolution, his general theory of co-operation, permeated as it was with optimism, was actually perceived as a scientific validation for the co-operative development of Russian society.

* * *

The subsequent progress of co-operative theory in Russia is linked with the name of Alexander Chayanov. A scholar, writer and active public figure, Chayanov perished during Stalin's repressions and has only recently been rediscovered: first in the West (in the 1960s) and subsequently in his native Russia (though only at the end of the 1980s). Chayanov's book The Theory of Peasant Economy (Teoriya krest'yanskoi ekonomiki) appeared in an English translation in two editions - in 1966 and 1986-7. The introductory articles to the book which were written by D. Thorner, B. Kerbley, R. Smith and T. Shanin provide a good picture of the author's career and contribution to learning.31 These articles have concentrated mainly on the theory of the peasant economy, which was the main object of Chayanov's concern and of his thinking as a scholar and public figure. The present book represented his basic work on peasant co-operation -which not only makes it possible to modernize, and therefore rejuvenate and rescue the peasant economy of family farmers, and enhance the well-being and culture of the countryside, but which also makes it possible to restructure the life of society as a whole, including rural society, advancing social justice and general pros­perity.

The publication of works devoted to the modernizing of agriculture marked the beginning of Chayanov's life as a scholar. As a 20-year-old student of the Moscow Agricultural Institute (now called the Timiryazev Agricultural Academy), Chayanov at the end of his second year of study in 1908 spent his vacation in Italy and then, in 1909, in Belgium. In both cases his vacations were taken up with studying the work of co-operatives in the countryside and the agronomical services which they provided. The choice of these subjects was not in itself out of the ordinary: they were at that time the 'sore spots' of Russian society. Moreover, his teachers had included the eminent expert on agronomy, D. N. Pryanishnikov and the well-known economist A. F. Fortunatov, who had themselves made extensive studies of both agronomy and rural co-operation. Fortunatov had been the author of one of the first courses on co-operation for students in Russia.32 Pryanishnikov in 1904 had visited

xxii Introduction

Italy and had drawn attention to the important role of agronomical services in the development of its agricultural co-operatives.

There was nothing fortuitous nor was there anything new in studying the experience of other countries which had achieved significant successes in agriculture by means of an efficient agronomical service and of a widely developed system of co­operatives. The beginning of the century in Russia had been marked by quite a number of such studies. By way of example we should mention the writings, which became well-known, of Professor A. N. Antsyferov - the author of Co-operation in the agriculture of Germany and France (Kooperatsiya v sel'skom khozyaistve Germanii i Frantsii), which was published in 1907; this author also delivered a series of lectures at the Shanyavskii University on 'The present state of credit co-operatives in the countries of Western Europe', which was published in 1913.

Chayanov's student writings proved to be quite out of the ordinary. This was recognized at the time, as is shown by the fact that they were published at once in the mainstream press of that day. The central All-Russian journal Vestnik sel'skogo khozyaistva (The Agricultural Gazette') had, already in 1908 printed in two of its issues Chayanov's article on the work of agronomists in the Italian countryside. In 1909, his 'Letters from the Belgian countryside' appeared in 6 issues of this journal; and in 1910, spread over 15 issues was his analysis of Belgian data concerning agricultural credit, 'public measures' relating to cattle-rearing and the insurance of cattle. In 1909 a pamphlet by Chayanov followed under the title Co­operation in Italian Agriculture {Kooperatsiya v sel'skom khozyaistve Italii). Of course these letters and essays devoted a great deal of space to descriptive material on matters of special relevance for practical work in Russian agriculture. However, they were written in a lively and persuasive way and involved a quest for those aspects of advanced experience in other countries which could be adopted and utilized in Russian agriculture in order to help solve its own problems, above all for the improvement and advancement of the small-scale peasant economy. It was precisely this emphasis on the social aspects of research, and the highlighting of general questions concerning the importance of co-operation, organization and agronomy which constituted the distinctive characteristics of Chayanov's early writings. They had outlined a range of problems which would ever afterwards remain crucial in his scientific activity.

In his pamphlet on peasant co-operation in Italy he had focused attention on elucidating the role of co-operation in the general and rapid advance of agriculture which could be seen in that country at the end of the last century and the beginning of the present one.

Introduction xxiii

Here he came across genuine evidence of the capacity of co­operatives not only to defend the peasant against the offensive from private capital, particularly the money-lender and the middleman, but also of its capacity to create an economic mechanism to underpin the adaptation of the peasant economy to market conditions, thus promoting a general advancement. Italy's growing agricultural production, so Chayanov maintained, 'was not artificially contrived in isolation from the popular masses ... but was, on the contrary, engendered from the depths of the national economy. Since it marked a real economic renaissance of the entire nation, it contributed powerfully to the enhancement of the well-being of the popular masses.'.33

What seemed to Chayanov to be particularly valuable in Italian experience was the direct link between the work of credit co­operatives and that of publicly organized facilities with regard to agronomy. This, in the first place, guaranteed the rational and efficient organization of credit facilities for peasant households (in Russia this problem was still unsolved). Secondly, this system made it possible to carry the financing of agriculture beyond the stage of partial, often piecemeal, improvements and to proceed to the stage of influencing regional and national production as a whole. In this way, new conditions were created for the growth of co-operatives and for the enhancement of their role. Direct comparisons between those cases where a credit system was established and those cases where it was not (as in Russia) - provided extremely eloquent testimony in favour of co-operation.34

In the case of Belgium, too, Chayanov was particularly interested in the interaction between co-operatives, publicly organized agron­omical facilities and state policy, in the process of the radical 'marketization' of agriculture, and in the sharpening conflict between large-scale and small-scale forms of production in which the peasantry found itself under attack. It was while he was studying Belgian co-operatives and peasant households that Chayanov arrived at a new interpretation of both. This interpretation was prompted by the high level of efficiency, organization and rationality in the structure of the peasant co-operative system which made the component elements and connections in this system transparent. The conclusion Chayanov formulated for the first time stated that the analysis of the internal structure of the peasant economy 'reveals to us a number of distinct technical processes in agriculture which are, through the deliberate activity of "economic man" integrated into an "economy" . . . Each one of these processes is so self-contained that it can be detached in a technical sense wihout disturbing the general organizational plan of the economy'.35

xxiv Introduction

This conclusion very soon developed into a formulation of the main theme of Chayanov's research: the theory of the peasant economy. It was precisely here, in his essays on Belgium, that one can discern the starting-point of his explanation of the importance of peasant co­operation which he described as 'the possibility - without making any special changes in the economic equilibrium and without substantially destroying the organizational plan of the small-scale rural economy -of organizing some of its particular technical economic activities where large-scale production enjoys an undoubted advantage; organizing these activities up to the level of large-scale production by technically detaching them and merging them with similar activities being undertaken by neighbours, into a co-operative'.36 The words just quoted were constantly to recur in his writings right up to the end. The idea which they expressed was developed and added to, it was to be reinforced by fresh arguments and fresh investigations and meanings; and it was to develop into a general theory of peasant co­operation which was most fully expounded in the present book.

The young author of the 1909 articles understood that if peasant households were to be brought within the co-operative system, conditions of commodity production were essential. 'Such a merger' so he observed '. . . does not take place until processes are introduced of a kind which can be merged; and it is particularly important to remember this in Russia' (where the involvement of peasant households in commodity relations was only just beginning). But once these conditions existed, then in his view, the process of bringing peasant households into the co-operative system became a matter of objective necessity. The circumstances in Belgium (the crisis of small-scale farming and so on) 'compelled small-scale farms to organize certain aspects of their organizational plans along co­operative lines - by dint of the same historical necessity whereby the development of machinery had led to large-scale capitalist production in industry'.37 This comparison of the importance of the extension of co-operatives with that of industrialization does, of course, contain an element of exaggeration. At that time, however, there had been no development of non co-operative methods of introducing elements of large-scale production and distribution into farms of the peasant type.

A key had been found to the solution of one of the main problems of the social-economic development of Russia - the problem of the peasants' road into modern society. However, it would require years of further analytical work and - what was particularly important - of practical work in the Russian co-operative movement, before the understanding of the organizational structure of co-operatives could evolve into a theory of co-operative development for the peasant economy and into a programme of practical action.

Introduction xxv

Already at the stage when Chayanov was becoming established as a scholar and public figure (and it is in this way that the pre-revolutionary years of his career can be defined), he was showing a characteristic desire and ability to connect science with life and to turn knowledge into practice. He rapidly became an active figure in the co-operative movement in Russia, and was one of the organizers and leaders of the Central Association of Flax-Producers' Co­operatives (L'notsentr, which was set up in 1915). It was natural that his research and teaching activity should have combined an analysis of practical questions (his publications of those years included articles on the co-operative marketing of agricultural products, the co­operative study of markets, the work of agronomists in co­operatives, the teaching to peasants of co-operative book-keeping, the setting up of co-operative associations and so on) with an analysis of questions of a conceptual nature, involving, in particular, the introduction of a general teaching course on co-operation, based on lectures delivered at different places.

A. V. Chayanov's Short Course on Co-operation (Kratkii kurs kooperatsii) was published in 1915 and enjoyed great popularity. In the years 1919-1925 the book was to be re-issued in three further editions. (Several further editions were to appear after his rehabilitation in 1987.) In its treatment of the general questions of co-operation, this course comes close to the conceptions of M. I. Tugan-Baranovskii; but in its interpretation of peasant co­operation it differs very substantially from those conceptions and even contradicts them; since it regards the peasant household as the basis of a future agrarian system - perfected both in its productive and in its social aspects; and it regards co-operation as the path to the creation of such a system and as a form of its existence.

The formation of Chayanov's theory of the co-operative develop­ment of the peasant economy, and of the political programme connected with it, was decisively influenced by the Russian Revolution of 1917 which opened up opportunities for a choice in the path of social development and which provided experience of social and economic transformations. From the very first days of the Revolution, Chayanov was an active participant who fought for the implementation of profound democratic and social reforms, including radical transformations in agriculture. In April 1917 he was one of the founders of the League for Agrarian Reforms, whose aim was to bring about a discussion of the agrarian question and ways of solving it. As a member of the Central Managing Committee of the League, he took part in drawing up a document whose purpose was 'to define the parameters within which ... a discussion of the agrarian problem should take place. We are of the opinion (1) that the self­

xxvi Introduction

employed co-operative peasant farm should form the foundation of the agrarian system in Russia; and that our country's land should be handed over to it; (2) that this transfer should take place on the basis of a state plan for land organization, drawn up with due regard for the special features of the life and economy of different regions and implemented in a planned and organized way without damaging the productive effort of our national economy; (3) that land organization is only a part of the solution to the agrarian problem, which involves all matters connected with the general conditions of agricultural production, the organization of self-employed peasant farms and the organization of links between these farms and the world economy as a whole'.38

Apart from A. V. Chayanov, the members of the Managing Committee of the League included some of the most eminent agrarian specialists of that time, who, moreover, represented different political tendencies (N. P. Makarov, P. P. Maslov, S. L. Maslov, N. P. Oganovskii and others). The platform presented in their joint names was evidence of the fact that the idea of agrarian reform orientated towards a co-operative peasant economy had become widespread and had gained wide support from public opinion in the country. The validation of this idea was the subject of Chayanov's brilliantly written pamphlet What is the Agrarian Question? (Chto takoye agrarnyi vopros?) (It was printed as the first in a series of publications by the League on basic questions of agrarian reform). The textual similarities between Chayanov's pamphlet and the three points of the platform quoted above indicate that they were written by the same hand. These two documents taken together do indeed represent a political programme for the solution of the agricultural question in Russia, drawn up by Chayanov and supported by the League for Agrarian Reforms.

The starting point for Chayanov's programme included the most revolutionary demands of 1917, and above all the demand which had become the slogan of all democratic forces: 'The land - to the working people!'. 'In accordance with this demand', so the pamphlet explained, 'all land now forming part of the farms of large landed estates must be handed over to self-employed peasant farms'.39 This 'transfer of privately owned land to the peasantry' could be carried out in the form of socialization, in the sense of the abolition of any ownership of land ('it belongs equally to everybody, like the light and the air'); or in the form of nationalization, that is, the transfer of the land into the ownership and control of the state; or in a form involving a decisive role for local self-management in the control of the land, and involving the use of a 'single tax on land' in order to collect a ground rent for the benefit of the people (following the idea

Introduction xxvii

of Henry George); or finally, through the creation of a 'system of state regulation of land ownership' with a ban on the right to buy and sell land.40

None of these alternative solutions to the problem was totally excluded: the choice was eventually to be made by the Revolution. However, Chayanov himself sought to find the best solution to the complex problem of 'implementing the socialization of the land and its transfer to the self-employed peasant farms with the minimum difficulties and the minimum costs'. He was inclined to favour a combination of the last two alternatives - a system of state regulation of land ownership and a system of progressive land taxes with the additional right 'to expropriate any land', since he believed that this would make it entirely possible 'automatically within one or two decades to achieve nationalization or municipalization'.41

The socialization of land ownership and its transfer to the peasantry were only the starting point of an agrarian reform whose aim was infinitely broader and more important, namely to create 'a new agrarian structure and a new kind of land ownership'.42 The purpose of the reform was to ensure 'the development of productive forces' and the creation of 'new production relations' of a kind which would meet two basic criteria (or, what amounted to the same thing, two principles of a particular conception of organization and production), namely (1) the maximum productivity of the labour invested by the people in the land; and (2) the democratization of the distribution of the national income.43

When assessing, in the light of these criteria, the 'conceivable systems of production relations', Chayanov rejected not only capitalism but also 'state socialism' and 'anarchistic communism' although it seemed to him at that time that they might be regarded as 'theoretical organizational forms' of the principle of the democrat­ization of distribution. However the task, in his opinion, consisted in 'bringing both organizational principles into harmony with one another'.44 Only co-operation was capable of achieving this and therefore the future agrarian system must be based on co­operatives.

The case for a co-operative future now began to rest not only on the possibility of protecting the small-scale peasant household under conditions of market competition, but also on the economic and social merits of co-operation in comparison with those of a large-scale capitalist economy. Chayanov saw the real advantages of the latter in market specialization and in the use of complex machinery and of the achievements of science ('the availability of agronomists', 'improved cattle' and so on). Relying on the yardsticks used at that time, Chayanov considered, first, that 'the very nature of an agricultural

xxviii Introduction

enterprise places limits on the enlargement of its scale' and therefore, that 'the advantages of a large-scale over a small-scale economy in agriculture could never be very great in quantitative terms'. Secondly, practical experience led him to the conclusion that co-operation had the capacity 'to impart all these advantages of a large-scale economy to small-scale peasant households'. Moreover 'small-scale peasant households, when joined in co-operative associ­ations, achieve a scale and potential which is actually greater than those of the very largest private farms'.45

This comparison between small-scale and large-scale farms was not confined to the sphere of production. Chayanov was led by the logic of his thinking to an analysis of social differences: 'We have to compare, not large-scale and small-scale farms, but a farm which is operated by its owner and by the manpower of the owner's family, on the one hand; and, on the other hand, a capitalist farm which is operated by hired labour'.46 For Chayanov, this description in itself contained the proof of the advantages of the peasant household, advantages which were to be revealed to their full extent under the conditions of a co-operative system. In those conditions the path was opened to the constant intensification of labour, the growth of production and social wealth combined with a guarantee of democratization in the distribution of the national income.

In 1917, as a 'non-party socialist' who was also the author of a socialist and radical programme of agrarian reform, Chayanov rapidly won political authority. He became a member of the Main Land Committee, which had the task of politically supervising the preparation and later implementation of land reforms; he became a member of the Council of the Russian Republic which exercised supreme state power pending the convening of the Constituent Assembly; and finally, he was appointed assistant to the Minister of Agriculture in the last Provisional Government.47 There is every reason to suppose that agrarian reform in conditions of further democratic development would have borrowed many of the ideas set out in Chayanov's programme. However the pursuit of such an agrarian reform proved impossible owing to the narrow mindedness of the ruling classes, the weakness of democratic institutions which had not yet been fully formed, and the shortsightedness and political blindness of the people who led these institutions.

In the Russia of 1917-9 a peasant revolution had broken out which had destroyed ownership by landlords as well as private land ownership in general. It had taken the form of the direct seizure and redistribution of land; and had no connection whatever with co­operatives or with any other formerly denned programme. The wave of this revolution led to the success of the Bolshevik workers'

Introduction xxix

revolution, which placed the Communist Party headed by Lenin in power; they, in turn, embarked on revolutionary socialist transfor­mations implemented by dictatorial methods. A political dictatorship of the working class was established which very soon degenerated into the dictatorship of the Communist Party and later, by the end of the 1920s, degenerated into Stalin's bureaucratic dictatorship. But, in the years 1917, 1918 and 1919, a popular revolution was in progress which was deciding the fate of the country.

A. V. Chayanov belonged to the stratum of the Russian intelligentsia which, despite its extremely complex, contradictory and mainly negative attitude towards the October Revolution of 1917, very soon began to work within Soviet institutions or within co­operative organizations which were collaborating with Soviet power; and did so with obvious and increasing benefit to the Soviet Republic. Here we can quote the testimony of Chayanov himself. At the beginning of 1930 when he was being subjected to sharply intensifying persecution, he managed to publish in the Sei'skokhozyaistvennaya gazeta ('Agricultural gazette') an article entitled 'On the fate of the neo-narodnikf which was written with astonishing sincerity, almost as if he had already anticipated his own fate. This is what he then wrote about his attitude to the October Revolution: 'In general / entirely agree with the view once expressed by Jaures that a revolution can be either completely rejected or equally completely accepted, just as it is. I have been guided by this view throughout all the years since our revolution took place, Therefore the question of my attitude to the October Revolution was decided not at the present time, but on that day in January 1918 when the Revolution discarded the idea of the Constituent Assembly and followed the path of the proletarian dictatorship. Ever since February 1918, my life has been bound up with the revolutionary reconstruc­tion of our country; and, as I carefully recall, day by day, the years which have passed, I believe that no one has, or can have, any grounds for refusing to-describe me as a Soviet worker, without any inverted commas'.48

The complexity of Chayonov's relations with the Bolshevik leadership lay in the fact that whilst he joined in the common endeavour, he maintained his independent views and openly criticized everything in Bolshevik policy which he considered to be incorrect, mistaken, harmful or simply unnecessary from the point of view of socialist policy or from the point of view of the tasks and opportunities of the period of transition to socialism. Chayanov's standpoint was openly and precisely formulated in his review of Nikolai Bukharin's book The Economics of the Transitional Period (Ekonomika perekhodnogo perioda, 1920). The gist of Chayanov's

xxx Introduction

observations was that'. . . many of the phenomena of disintegration in our national economy do not spring endemically from the transitional period [as they were portrayed in this book - V.D.] but are the inevitable result of measures which have not been thought through, which are unnecessary or not obligatory . . .\49 This was precisely the standpoint of Chayanov which has emerged from recently published documents of co-operative conferences and congresses in 1919 and in the following years.50

Chayanov's main pronouncement during the period of the Bolshevik Revolution and civil war was his book entitled The Basic ideas and organizational forms of peasant co-operation {Osnovnye idei i formy organizatsii krest'yanskoi kooperatsii) which appeared in 1919 and was an early version of the book now published in a shortened form in English translation. The writing and publication of the monograph was the result, above all, of a decade of research work which made it possible to provide a concrete picture of the organization and functioning of all forms of agricultural co-operation and of all the main branches of its work - and thus to provide an extended validation for the concept of the co-operative peasant economy on the basis of enriched and reinforced arguments. There was something else which was no less important: the book represented a direct answer to the questions raised by the course of the Russian Revolution. It is well-known that from the autumn of 1918, priority was being given in Soviet agrarian policy to the creation of collective and Soviet (i.e. state) farms. This first experiment in collectivization did not, and could not, lead to serious results. On the contrary, it provoked widespread opposition among the peasantry and, in the spring of 1919, the goal of collectivization was dropped for the purpose of practical politics, although it was retained in socialist policy programmes as a long-term perspective which remained constant, (although requiring the creation of the objective preconditions, strict adherence to the principle of voluntary" membership and so on). The collective farm movement, which mainly included some revolutionary elements of the landless strata in the countryside, enjoyed total support from the state. All the greater therefore was the urgency of a critical analysis of the nature of the experiment in collectivization which had taken place. The book, which appeared in that same year, 1919, directly in the train of events, decisively rejected 'the communization of production' in agriculture as well as 'the co-operative socialization of the entire peasant economy'; and pointed out such genuinely difficult problems as 'labour incentives', 'the organization of labour' and 'the managerial will', that is, the issues of management.51 The experience of subsequent Soviet history has made us very familiar with the

Introduction xxxi

difficulty of solving all these problems. However the idea of collective agriculture (based on artel', that is partnerships) was in no way totally discarded: it became an integral part of the general concept of the co-operative development of the countryside.

A specific familiarity with the organizational-productive structure of the peasant economy and of the possibility of separating it into parts and of splitting off certain productive and organizational functions, made it possible, as A. V. Chayanov showed '. . . to split off and organize in the form of large-scale co-operative enterprises, those sectors where such an enlargement of scale would produce a noticeable positive effect . . . without disturbing those aspects of the economy where small-scale family production was technically more convenient than large-scale production'. In the end, the opportunity was created for organizing all levels of activity, all functions and types of work, etc., 'on the particular scale and on the social foundations which are most appropriate for them'. Thus, side by side with the peasant household, a 'large-scale collective enterprise of the co-operative type' was arising.52 In 1919 it was commonplace to emphasize the subordinate role of co-operation in relation to the peasant economy. This was reflected in the following definition: 'Peasant co-operation ... is a part of the peasant economy which has been split off for the purpose of being organized on large-scale principles'. Co-operation would exist for as long as the peasant economy existed; and it was this which predetermined 'the limits of co-operative collectivization'.54

Only a few people were able to understand the originality and depth of the idea of 'co-operative collectivization', particularly in the conditions of 1919-1920. But there is no doubt that the idea of 'co­operative collectivization' found endorsement in Lenin's article 'On co-operation', of 1923, particularly in the article's conclusion that for the Russian peasants the growth of co-operation was in itself identical with the growth of socialism. It is known that Chayanov's book was one of the seven books on the theory and practice of co­operation which Lenin consulted when he dictated the article on his death bed.55

The second edition of the book on peasant co-operation was extensively revised and supplemented - as stated on its title-page. The preface to the book, was dated 1 December 1926 - which indicates that the changes and additions were not prompted by political expediency, nor were they due to coercion nor in general were they dictated by extraneous factors (which was to become commonplace in publications on public affairs from the beginning of 1928). The New Economic Policy, orientated towards the socialist development of the countryside through co-operation, as well as the

xxxii Introduction

practical experience of co-operation itself in the 1920s, had provided a genuinely new, rich and important factual material for verification, clarification, the perfecting of the system and from a conceptual point of view. The theoretical discussions which took place in the 1920s on economic and social problems provided a great deal of food for thought.

What was entirely new in comparison with the first edition of the book was an analysis in depth of the problem of the 'horizontal' and 'vertical' types of concentration of production, of their potential and of the interrelationship between them. The importance of this theoretical analysis has been confirmed by the experience of agricultural development in different countries. Either there is a powerful upsurge of production, accompanied by social progress, along the path of 'vertical' concentration, that is, along the path of growing diversity and interaction between different forms and scales of the organization of production processes and economic ties, both of the co-operative and the non-co-operative varieties. Or by contrast, production will stagnate and there will be social stalemate, if the path of 'horizontal' concentration is followed - assuming, of course, that this is not accompanied by something much worse (i.e. brutal coercion as happened under Stalin's collectivization). From the point of view of socialist development, 'vertical' integration in its co­operative form was obviously to be preferred. The book indicated how, in the long term, the establishment of a co-operative system of agricultural production means that'. . .the entire system undergoes a qualitative transformation from a system of peasant households where co-operation covers certain branches of their economy into a system based on a public co-operative rural economy, built on the foundation of the socialization of capital which leaves the implementa­tion of certain processes to the private households of its members, who perform the work more or less as a technical assignment.'56

'Horizontal' concentration in the form of collective farms was in n^> way rejected out of hand. Collective farms, set up by peasants of their own free will - on their own initiative and in their own interests - could and should be part of the co-operative system in accordance with general co-operative principles. 'The choice' so Chayanov wrote 'would not be between collectives and co-operatives. The essence of the choice would be whether the membership of co-operatives is to be drawn from collectives or from peasant family households'.57 He did not exclude the possibility (although he did not think it the most desirable) of a 'concentration' of production embracing the whole of agriculture, in which 'literally all peasant households were ultimately merged into communes and were organized on optimum areas of 300 to 500 hectares' [741 to 1235 acres]. But it was emphasized that this

Introduction xxxiii

should 'in no way affect our basic system of co-operatives engaged in purchasing, credit, marketing and production, which would continue to be organized as before. The only difference would be that the membership of primary co-operatives, instead of being drawn from small peasant households, would be drawn from communes'.58

'Co-operative collectivization', so A. V. Chayanov believed, repre­sented the best, and perhaps the only possible way of introducing into the peasant economy 'elements of a large-scale economy, of industrialization and of state planning'.59 What he saw as its merit was that it was implemented on an entirely voluntary and economic basis which amounted to 'self-collectivization'.

The idea of 'co-operative collectivization' reflected the basic tendency of the actual development of co-operation in the Russian countryside in the 1920s, and offered a real alternative to collectivization of the Stalinist variety. This was quite enough to ensure that the book would very soon be condemned and banned; and that its author would be among the first victims of Stalinist repression.

8. Ibid., p. 30. The idea of the possibility of forming and developing different social structures on the basis of one and the same mode of production was a new idea which ran counter to prevailing Marxist assumptions of the day. It is gaining scientific currency in our own time.

9. Ibid., pp. 114, 115.

10. Ibid.

11. Ibid., p. 121, 153 et al.

12. Ibid., p. 444.

13. Ibid., p. 453.

14. M. I. Tugan-Baranovskii, Sotsial'nye osnovy kooperatsii {The Social Foundations of Co-operation), Berlin, 1921, p. 4. We have made use of the copy of the book which exists in the library of Cambridge University (Great Britain).

47. The following is the description of A. V. Chayanov, which appeared on the list of candidates nominated to the Constituent Assembly by the national organization of the co-operative movement of Russia: 'Chayanov, Aleksandr Vasil'yevich. Member of the Council of the

Introduction xxxv

Russian Republic, representing co-operatives. Member of the All-Russian council of co-operative congresses. Teacher at the Petrov-Razumovskii Agricultural Academy. Member of the Main Committee on Land issues. Assistant to the Minister of Agriculture. Co-operative movement activist. Member of the Council of the Central Association of Flax Producers in Moscow. An economist. WeD-known for his writings on the land question, the peasant economy and co-operation. In politics - a non-party socialist'. (Gobs naroda, organ of the co-operative alliances and associations, 12 (25) November, 1917). It should be noted that Chayanov could not take up his duties in the Ministry of Agriculture.

48. Sei'skokhozyaistvennaya gazeta, 29 January 1930.

49. Quoted from N. Bukharin and G. Pyatakov The Cavalry Charge and the Heavy Artillery (A light-hearted response to the critics of The Economies of the Transitional Period)'. Krasnaya nov'. Literary-artistic and scientific, social-political journal. 1921, No. 1, p. 272. The reply tendered apologies to Chayanov for the use of his unpublished manuscript (p. 256). The manuscript has unfortunately not been found.

This inquiry is based on the personal experience of the author - who has worked for some twenty years in the ranks of the Russian co­operative movement - and on his observation of the co-operative movements in Italy, Belgium, Germany, Switzerland and France. It is also based on the work of a seminar on questions of agricultural co-operation which has been running for many years and which has been led by the author since 1913 at the Timiryazev (formerly the Petrov) Agricultural Academy.

The book includes substantial revisions of its first edition, which have been undertaken so as to keep pace with developments in co­operative theory. It also includes, among other things, material originally presented in a report to the co-operative section of the congresses of the Supreme Council of the National Economy (VSNKh) in 1919.

The author has deliberately narrowed the scope of his inquiry to an analysis of the basic ideas of agricultural co-operation and to an investigation of its basic organizational forms. We have not attempted to describe fully the present state of agricultural co­operation, still less have we attempted to outline its history, since we had neither enough material nor enough time for such an ambitious inquiry.

Yet even within the limited scope of our subject, we are still far from having gained a complete or final grasp of the material because the focus of our study - the peasant co-operative movement - is developing so rapidly in its scope and depth that theoretical ideas have lagged behind its practical achievements. Hence the many defects of this book and, perhaps, the element of haste in its

xxxviii Author's Comment

conclusions, which seek, ahead of time, to provide a logical framework for the new forms of a spontaneous movement which are now being historically envisaged.

Colleagues who read the page-proofs of this book drew my attention to the not entirely clear way in which I had used the terms 'state capitalism' and 'capital' in relation to the peasant household. I therefore think it necessary to make it clear in the preface that:

1. In relation to the peasant household, which has no variable capital, I have used the term 'capital' in its most general sense; and it does not, of course, have the historical connotation associated with the capital within capitalist production.

2. In exactly the same way, I have used the term 'state capitalism' in the sense in which it was understood in our country in 1923: that is, as a synonym for a planned economy, based on state enterprises employing hired labour. No special social or political connotation is implied in this term.

The Author

Petrovsko-Razumovskoye 1 December 1926

1

The Processes and the Concept of Vertical Concentration in the Rural Economy: Peasant Co-operation as an Alternative

It is highly likely that a great many of the readers of this book -agronomists, engineers, teachers and those who work in the rural community - have more than once despaired when faced with the obstacles that the life of a modern Russian village has placed in the way of what they are doing.

It must be realized, of course, that there are good reasons for this. No one will deny that the basic idea underlying the organization of the contemporary economy is the idea of large-scale organizational measures, involving many thousands of workers, tens of millions of roubles of capital, gigantic technical constructions and the mass production of standardized goods. The Ford machine-building factories, the Volkhovstroi and the other gigantic hydroelectric plants, the ocean-going transport lines, which are serviced by high-powered transatlantic enterprises, banking concerns that concentrate milliards of roubles of capital into a powerful economic fist - these are the economic facts which dominate and fascinate the minds of those who manage the economy at the present time.

It is no wonder, therefore, that many of our comrades, especially our younger comrades, whose minds are still full of images of the goals and achievements of the present-day industrial economy, and who are impatient to achieve something similar in their own provinces, are often reduced to utter despondency after a few months' work. They come close to desperation as they get jolted in a peasant cart on a rainy November evening along impassable roads from somewhere like Znamensk via Buzayevo to somewhere like Uspensk. Everywhere they encounter a lack of roads as well as the poverty and indifference of peasants installed on small, overlapping

1

2 The Processes and the Concept of Vertical Concentration

agricultural allotments, and who, with an excessive 'purely petty-bourgeois stupidity', are turned inwards on their tiny holdings.

We are sympathetic to the desperation of such a comrade who has visions of being in a Ford workshop although in reality his work obliges him to deal with two people farming five acres of ploughed land with one cow and often without a horse.

However, while understanding the subjective desperation of the beginner, we are in an objective sense totally disinclined to accept his depressing conclusions.

It is still quite obvious, of course, that the economic life of the peasant countries - China, India, the Soviet Union and many other countries of Eastern Europe and Asia - does not provide us with the sort of visible and obvious achievements of new organizational forms which we can easily see in the industrial countries of the West.

However, any economic phenomenon should always be examined from the point of view of the way it evolves, and it should, so far as possible, be examined in depth. If such an approach is adopted towards the agriculture of peasant countries, it then turns out, greatly to the surprise of many people, that agriculture is not only not hopelessly unsuited to the application of wide-ranging organiza­tional policies, but that it is precisely here, in our present epoch, that intensive changes are occurring. These changes are making it into a subject whose organizational scope is of no less importance than the large-scale innovations in industry. It would therefore be useful in the highest degree for our despondent reader to understand that it is precisely in those outlying areas that the greatest potential exists for the goals and achievements of the future.

The point is that, so far, these changes are only at their very first stage of development and that they cannot and do not obviously provide us yet with anything like a complete picture which can be made the subject of a photograph.

The whole purpose of this book is to show the paths along which our countryside is developing and the forms in which it is being organized. As a result, there occurs a barely perceptible, but in reality a most radical, restructuring of the countryside's organiza­tional foundations. The countryside, which only ten or twenty years ago presented an anarchical picture of diffuse, minute, semi-cultivated households, is now on its way to becoming the object of the most wide-ranging structural innovations and the base for large-scale economic activities.

If, on the basis of the evidence, we study the historical course of the development of urban industry and banking, we can easily see that their modern forms of organization, whose power and scale so impress us, have certainly not always existed. They are the result of

The Processes and the Concept of Vertical Concentration 3

gradual and in fact fairly recent development. In the not so distant past, some 150 years ago, the textile and even the metal-working industries were organized in the form of small-scale craft enterprises, often run as family concerns. And it was only capitalism, as it developed and grew stronger, which caused the disintegration of the patriarchal forms of the organization of production on the basis of crafts; and which, after first gaining control over the trade turnover, created the first large enterprises in the form of textile mills, subsequently multiplied them in the form of modern factories and plants and, in the final phase of its development, consolidated them into trusts and syndicates of various kinds.

There is no need for us to describe this process in detail: it will be known to our readers from any textbook of political economy.1 For the purpose of the present book, the one important thing about this process of capitalist development is that in the sphere of agriculture this process was retarded; and that in many places its evolution assumed somewhat different forms.

There is, of course, no doubt that in agriculture, as well as in industry, large-scale forms of economic organization yielded con­siderable advantages and lowered production costs. In agriculture, however, these advantages were not as apparent as in industry.

The reason for this lay in the technical conditions of agricultural production. Indeed, the main form of concentrating and enlarging the scale of production in industry was that of so-called horizontal concentration, i.e. a form of concentration under which a multitude of very small and geographically scattered enterprises were merged, not only in the economic but in the technical sense, into one gigantic whole which concentrated enormous reserves of manpower and mechanical power into a small space and thereby achieved a colossal drop in the production costs. But in agriculture the achievement of such a degree of horizontal concentration was unthinkable.

What is meant by agriculture is basically the utilization by humans of the solar energy that reaches the earth's surface. The solar rays that radiate on to 100 acres of land cannot be focused onto 1 acre of land. They can be absorbed by the chlorophyl of the crops sown only over the entire radiated area. Agriculture is, by its very nature, inseparably connected with a large area; and the greater the scale of an agricultural enterprise from the technical point of view, the larger the area that it has to occupy. In that sense, no concentration in space can possibly be achieved.

Let me quote a small example. A factory owner who possesses a 100-horsepower engine and who wants to increase his output tenfold can install a 1,000-horsepower engine and thereby considerably reduce his working costs. But let us suppose that a farmer who tills

4 The Processes and the Concept of Vertical Concentration

his strip of land with one horse wants to achieve a tenfold increase in his sowings. He naturally cannot acquire a horse that is ten times larger: he has to acquire ten horses of as good a quality as the first horse. There will be some reduction of costs through a substitution of tractor power for horse power. But the farmer who already has one tractor and who increases his sowings tenfold cannot increase the power of the tractor: he has to acquire ten similar machines to work simultaneously in different areas, as a result of which working costs will be reduced to a considerable extent. The same can be said with respect to other kinds of stock - seed, manure, cattle, and so forth.

A farmer, when he increases his production, is in most cases obliged to increase the number of the things that he uses, rather than to increase their scale. Because of this, the economies of scale, expressed in quantitative terms, are smaller. It should furthermore be noted that the very nature of agricultural production imposes a natural limit on the enlargement of an agricultural enterprise.

Granted, then, that agriculture is inevitably diffused in space, it follows that a farmer has to move an enormous number of objects around within this space. Horses and animals have to be moved around; so also do machines, manure and finished products.

The larger the household, the greater the land area it works. Therefore, the greater will be the quantity of the products and the greater the distances over which they will be transported; and therefore there will be a constant increase in the costs of transport within the household, both in relation to its economic activity as a whole and per unit of finished product.

The more intensively the economy develops, the more deeply and thoroughly the land wül be ploughed up and the greater will be the use of manure. Therefore, the more frequent will be the expeditions from the farmstead into the fields and the greater will be the burden of these journeys to and fro on the costs of production.

With the grain economy based on extensive farming operating in the Orenburg or Samara provinces, the proprietor needs to make only two expeditions: to sow the crops and to gather them in. But as soon as he begins to undertake an autumn ploughing for the sake of spring crops and to cart manure onto the fields, the number of expeditions increases many times over, as we can observe in our central agricultural provinces. Any further resort to intensive methods - the replacement of cereals by beet, turnips or potatoes -will increase the number of journeys to such an extent that every additional increase in the distance between the fields and the farmstead will make itself felt.

The entire benefit derived from the enlargement of the scale of

The Processes and the Concept of Vertical Concentration 5

production may be swallowed up by a rise in the cost of transport within the household, and the more intensive the household becomes, the more rapidly will this swallowing up occur. In Orenburg and Samara, our peasant households often extend over areas of 2-3,000 desyatiny [5,400 to 8,100 acres] run from one farmstead. In the Voronezh province, after the transition to three-field systems, the size of the optimal unit of exploitation fell to 800 desyatiny [2,160 acres]. In the Poltava province such an enlargement would already have been impossible. In the Kiev province and in Western Europe the costs of transport within the household will still further reduce the area of the household, bringing them to optimal levels of 200 to 250 desyatiny [540 to 675 acres].

It not infrequently happened that in earlier times, when house­holds began to be managed by more intensive methods, large-scale owners were obliged to split up their estates into a number of separate farmsteads. Although they were large landowners, they were small or medium-scale land cultivators.

Thus the very nature of an agricultural enterprise imposes limits on its enlargement; and therefore, in quantitative terms, the advantages of a large household over a small one in agriculture can never be very great.

So, despite the fact that even in agriculture large-scale forms of production had an undoubted advantage over small-scale forms, we must nevertheless recognize that in quantitative terms these advantages were by no means as significant as in manufacturing industry.

Owing to the fact that, from a quantitative point of view, the advantages of a large-scale economy were less than in the case of industry, the peasant households could not be so simply or decisively crushed by the large latifundia, as their counterparts, the family craftsmen, were crushed by the factories. Furthermore, the peasant households demonstrated an exceptional capacity for resistance and tenacity of life. While often starving in the difficult years, working to their utmost capacity, sometimes recruiting hired labour and thus themselves assuming a semi-capitalist nature, they held firm almost everywhere and in some places even extended their land-holding at the expense of large-scale capitalist agriculture. The wave of post­war agrarian revolutions which swept through Eastern Europe and even gripped Mexico strengthened their position still further.

However, the fact that the peasant economy demonstrated such a great capacity for survival in the universal economic struggle for existence did not in itself in any way mean that it was to remain untouched by the general capitalist development of the world economy. Capitalism, owing to the technical conditions which we

6 The Processes and the Concept of Vertical Concentration

have described, was unable to organize agriculture according to the principles of horizontal concentration and invariably looked for other ways of gaining control over the anarchy of agriculture and of organizing it according to capitalist principles. Instead of the not very well-suited forms of horizontal concentration, the gaining of control took the form of vertical concentration.

In actual fact, the most recent research into the development of capitalism in agriculture indicates that the involvement of agriculture in the general system of capitalism is in no way bound to take the form of the creation of very large farming enterprises organized on capitalist lines and operating on the basis of hired labour. Repeating the stages of the development of industrial capitalism, agriculture, having emerged from forms of semi-natural existence, was subordi­nated to commercial capitalism. This in its turn - sometimes by means of very large commercial enterprises - drew into its sphere of influence large numbers of scattered peasant households. By gaining control over the links between these small commodity producers and the market, commercial capitalism subordinated them to its economic influence; and, by developing a system of credit on conditions amounting to slavery, turned the organization of agricultural production into what was a special kind of exploitative distribution system based on squeezing the workers dry. In this connection one should recall those types of capitalist exploitation which the Moscow cotton firm 'Knopa' used in relation to cotton-growers: buying up their harvest in the spring; handing out advances for food; and granting credit in the form of seeds and tools of production. Such a commercial firm, being interested in the standardization of the commodity which it was buying up, would quite often also start to interfere in the organization of production itself, imposing its own technical standards, handing out seed and manure, laying down what the crop rotation was to be, and turning its clients into technical executors of its schemes and of its economic plan. A characteristic example of this kind of arrangement in our country was the planting of beet in peasant fields under contracts with sugar factories or contractors.

Having gained control over outlets to the market and having created for itself the base for raw material, rural capitalism begins to penetrate the production process itself, splitting certain sectors of activity away from the peasant household's activities, mainly in the sphere of the primary reprocessing of agricultural raw material as well as sectors connected with mechanical processes. The entre­preneurial, steam-powered threshing machines, which travelled round southern Russia offering services for hire, the small butter factories in Siberia at the end of the nineteenth century, the

The Processes and the Concept of Vertical Concentration 7

flax-processing workshops in Flanders and in some parts of our own flax-cultivating provinces - all these are vivid examples.

If, in relation to the most developed capitalist countries such as those in North America, for example, we add to all this the extensive development of mortgage credit, the financing of working capital for households and the commanding power of capital invested in transport, elevators, irrigation and other enterprises, then we begin to see new ways by which capitalism penetrates agriculture. It turns the farmer into a source of manpower working with means of production belonging to others; and it turns agriculture, despite its apparent diffusion and the autonomy of its small commodity producers, into an economic system controlled on capitalist principles by a number of very large enterprises, which in turn are under the control of the highest forms of finance capitalism. It is no accident that, according to the calculations of Professor N. Makarov, out of the revenue from farming realized on the wholesale commodity exchanges in America, only 35 per cent goes to the farmers, while the remaining 65 per cent is absorbed by capital involved in railways, elevators, irrigation, finance and commerce.

In relation to this vertical capitalist concentration, the transforma­tion of households from an area of 10 hectares [24.7 acres] to areas of 100 to 500 hectares [247 to 1235 acres], and the parallel transformation of a significant number of farmers from a semi-proletarian to an obviously proletarian position, would seem like a minor phenomenon. And if this phenomenon is absent, the evident reason is that capitalist exploitation brings a higher dividend precisely through vertical rather than horizontal concentration. In this way, moreover, it transfers a significant part of the entrepreneurial risk from the owner to the farmer.

The form of concentration of agricultural production just described is characteristic of almost all young agricultural countries which are engaged in the mass production of products of one type intended for remote, mainly export, markets.

Sometimes, as a result of the situation that has arisen in the national economy, this vertical concentration assumes forms which are not capitalist but co-operative or mixed. In this case, control over the system of enterprises involved in commerce, the handling of elevators, land improvement, credit and the reprocessing of raw material, which concentrate and manage the process of agricultural production, belongs wholly or in part not to the owners of capital but to small-scale commodity producers. They have organized them­selves and have invested their private funds in enterprises or have succeeded in establishing social capital for that purpose.

The appearance and development of co-operative elements in the

8 The Processes and the Concept of Vertical Concentration

process of the vertical concentration of agriculture becomes possible only at certain stages of the process itself; these co-operative elements can appear only when local capital is relatively weak. Here, we deliberately emphasize the word 'relative', since this relative weakness of local capitalist entrepreneurs can result not only from their own weakness in absolute terms but can also result either from the prosperity of the peasant household itself (as in Denmark) or from the fact that co-operative elements may be backed by the financial resources of the state or by the resources of large-scale foreign capital or industrial capital which needs unadulterated raw material.

A vivid example of this process is the development of butter manufacture co-operatives in Siberia. At the end of the nineteenth century, after the building of the great Siberian railway, there arose in western Siberia as the result of the abundance of land suitable for fodder, a situation that was extremely favourable to the development of butter manufacturing for export. In the area of Kurgan, Ishim and other districts, small-scale entrepreneurs began to appear one after another. They soon covered the area with small factories producing butter, thus beginning in a capitalist form the process of the vertical concentration of agriculture in western Siberia.

Siberian butter manufacture, which had been created by small company promoters, in the course of decades turned an originally favourable market into one that was unprofitable. It came up against an acute crisis owing to the very large number of established factories and their ferocious competition, both for milk supplies and in the selling of their butter. Surviving thanks not so much to the revenue from butter as to the profits derived from the shops and payments in goods for the milk, these factories eked out a wretched existence for a number of years and then began, one after another, to close down. For the peasant households which had already re­organized themselves into market-oriented dairy farms, these closures entailed the threat of heavy losses. Not wishing to go back to a natural economy, they were faced with the question of whether to take over the factories which were closing down and run them according to the principles of a traditional peasant partnership {artel').

The co-operative factories which eventually arose in this way were distinguished by the superior quality of their product over the adulterated butter produced by private entrepreneurs; and their development therefore received financial backing from the com­mercial capital of Danish and English export firms, which had their Siberian offices in Kurgan and in other cities. They rapidly squeezed the private entrepreneur out of the sphere of butter production.

The Processes and the Concept of Vertical Concentration 9

In this way, the concentration of Siberian butter manufacture, which was begun by small-scale industrial capital, was continued with the support of large-scale commercial capital in co-operative forms. 'The Siberian alliance of butter manufacturing co-operatives' made an entry onto the London market and, by relying on bank credit, it totally rid itself of the influence of local commercial capital.

In several different forms, but in accordance with the same dynamics, and also after forming various kinds of connections at different times with capitalist groups, there also developed other kinds of agricultural co-operation.

What has just been said is more than enough for the purpose of understanding the substance of agricultural co-operation as a particular form of the thoroughgoing process of the vertical concentration of agriculture. It must, however, be noted that in the case of co-operative forms this process takes place at a much deeper level than in the case of capitalist forms, since in the case of co­operative forms of concentration, it is the peasant himself who hands over sectors of his economy which capitalism does not succeed in forcibly wresting from peasant households. Such is our understand­ing of the vertical concentration of agricultural production in the conditions of capitalist society - a concentration which extends both to purely capitalist and also to co-operative forms.

When looking through the statistics of co-operation we see that at the present time co-operative forms of vertical concentration of agriculture have reached an extremely impressive scale. Present-day agricultural co-operative organizations in our country number within their ranks millions of households, and their turnovers have long since been reckoned in hundreds of millions of roubles.

It is precisely this process of the extension of co-operatives to our countryside that we would like to draw to the attention of our despairing worker in the countryside - as the initial phase of the journey which alone can bring the agriculture of peasant countries to a complete and decisive re-organization on the basis of the most large-scale organizational measures.

The now observable forms in which this process manifests itself are modest and not very obvious. What, indeed, can be remarkable about the fact that a peasant woman, after milking her cow, washes her can and uses it to take milk to a dairy association in a neighbouring village? Or in the fact that a peasant who cultivates flax takes his fibre not to the bazaar but to a co-operative reception centre? But in fact, this peasant woman with her minutely small can of milk is linked to two million similar peasant women and peasants and forms part of the co-operative system of butter centres, which constitutes the largest dairy firm in the world and is already

10 The Processes and the Concept of Vertical Concentration

perceptibly re-organizing the entire structure of peasant households in the dairy farming regions. And the small flax cultivator, who already possesses sufficient staying-power as a co-operative member, represents one particle in the co-operative system of flax centres, which is one of the most important factors constituting the world market in flax.

This is happening at the very first stages of our movement. Its future prospects are incomparably vaster. However, when adopting a programme for the vertical concentration of agriculture in co­operative forms, we have to envisage that this process will last for a considerable time. Like the consecutive phases of capitalist develop­ment, from its initial forms of elementary commercial capitalism to the present-day factory, and system of trusts embracing the whole of industry - the vertical concentration which is developing in co­operative forms in our agriculture must inexorably pass through a number of consecutive phases of historical development.

Beginning as a rule with the combination of small-scale producers for the procurement of agricultural means of production, co­operatives very soon turn to the organization of the co-operative marketing of agricultural products which they develop in the form of gigantic alliances combining hundreds of thousands of small-scale producers. As the intermediary operations of this type acquire the necessary scope and stability, they form the basis for a smoothly functioning and powerful co-operative apparatus and, what is particularly important, there occurs, in a manner analogous to the development of capitalism, an initial accumulation of co-operative capital. During this phase of their development, agricultural co­operatives, under the pressure of market forces and as a matter of historical necessity, evolve into organizations with their own operations for marketing and for the primary reprocessing of agricultural raw materials (involving co-operatives for butter manu­facture, potato grinding, canning, the dressing of flax, and so on); they remove the relevant sectors of activity from the peasant households; and, by industrializing the villages, they gain control of the commanding positions in the rural economy. Under our conditions, thanks to the assistance of the state and to the granting of state-credits, these processes are being accelerated and may occur simultaneously and become interwoven one with another.

Having extended the co-operative system to marketing and technical reprocessing, agricultural co-operatives thereby bring about a concentration and organization of agricultural production in new and higher forms, obliging the small-scale producer to alter the organizational plan of his household in conformity with the policy of co-operative marketing and reprocessing, to improve his technology

The Processes and the Concept of Vertical Concentration 11

and to adopt more perfect methods of land cultivation and cattle-rearing, which ensure uniform standards for the product.

However, having achieved this, co-operatives inevitably build on this success with the aim of even more widely embracing the productive sectors of the peasant economy (by creating machinery users' associations, assembly points, associations concerned with the inspection and with the pedigree of cattle, with joint processing, land improvement, and so on); and part of the expenses involved in these kinds of co-operative production are covered, and must as a matter of principle be covered, out of the profits derived from marketing, procurement and credits.

Given the parallel development of electrification, of technical installations of all kinds, of the system of warehouse and public premises, of the network of improved roads and of co-operative credit - the elements of the social economy grow in quantitative terms to such an extent that the entire system undergoes a qualitative transformation from a system of peasant households where co-operation covers certain branches of their economy - into a system based on a public co-operative rural economy, built on the foundation of the socialization of capital which leaves the implementa­tion of certain processes to the private households of its members, who perform the work more or less as a technical assignment.

Having carefully reflected on the enormous importance for agriculture of the process just described of vertical integration in its co-operative forms, we can maintain with conviction that from the point of view of the national economy the appearance of agricultural co-operatives is of no less importance than was the appearance of industrial capital a century earlier. We must note, however, that neither the importance of agricultural co-operatives nor, in general, the nature of the rural co-operative movement at the present time, have in any sense been adequately understood until now, even by their own creators and participants. This, incidentally, is quite understandable, since it is true of nearly all economic movements that theory comes considerably later than practice.

Capitalism, which is more than a century old, was in effect brought within the ambit of research only at the end of the last century and many of its most complex problems have not up till now been fully studied. Agricultural co-operatives represent such a young and as yet unformed movement that we have no right even to expect them to be the subject of comprehensive theoretical analysis. With few exceptions, all that we have for the moment is a co-operative ideology rather than a co-operative theory. Nevertheless, it is absolutely essential for us to ascertain in as much detail as possible the organizational forms within which, and the economic apparatus by

12 The Processes and the Concept of Vertical Concentration

means of which, agricultural co-operatives are carrying out and can carry out the colossal national economic functions which we have just described; under what conditions and under the pressure of what factors co-operative organizations come into being and are able to exist; and what incentives there are which set their energy in motion.

Without having a finalized or broadly perceived general theory of co-operatives, and making it our purpose to elucidate the nature of the new and gradually developing national economic system which is growing up on the basis of the vertical concentration of peasant households, we need first of all to ascertain what we mean by the concept of 'co-operation', i.e. the subject of study in this book. It means that we have to establish what the organizational and economic qualities are which we ascribe to the co-operative system discussed, and by what criteria we differentiate it from related formations of other kinds. In view of the widespread use in our everyday life of the word 'co-operation', this task might seem to be one of elementary simplicity. However, this is very far from being the case; and it should, perhaps, be recognized that this concept is among the most nebulous and unclear that we use.

It is commonly supposed - and this greatly obfuscates the real state of affairs - that our agricultural co-operative system is merely one variety of the general co-operative movement which also includes the system of consumer co-operatives in the towns as well as all kinds of co-operative associations of artisans and craftsmen. Their economic nature is deemed to be identical and, both in our country (in the Mezhkoopsovet, the inter-co-operative council) and in the International Co-operative Alliance, they are merged, even from an organizational point of view, into a single whole.

Despite this, or perhaps precisely because of it, we have not up till now produced any generally accepted formula which defines the general concept of 'co-operation'. And that remains true despite the repeated and numerous attempts of various authors and despite prolonged arguments over this question. Therefore, when setting out to clarify this term, we have to approach the question with particular caution; and we shall try above all to do so in positive terms by examin­ing how the co-operative members and activists of the co-operative movement themselves define the substance of their organization, and what they consider to be, or not to be, 'co-operative'.

Over the past fifteen years, during which time this author has had occasion to talk to Russian, Belgian, Italian and German co-operative activists, he has heard the most diverse, and sometimes contra­dictory, views of what attributes represent the substance of the co­operative movement.

The Processes and the Concept of Vertical Concentration 13

Some people maintained that the most important thing about co­operatives was that their membership was voluntary, that they were independent and that their management was democratic. Others attached importance to the methods by which profits were distributed and to the secondary role of capital in co-operative enterprises. A third group attached great importance to the openness of co-operative organizations, and thought accordingly that it would be contrary to co-operative principles to refuse to admit new members. A fourth group laid particular stress on the fact that co­operatives consisted of self-employed workers; and they were opposed not only to the admission of non-workers but also to the employment of hired labour in co-operative enterprises. A fifth group believed that the substance of co-operatives lay not in their organizational forms but in the social goals which they set themselves, i.e. in their struggle on behalf of the have-nots, which was in some cases socialist and in other cases religious in nature. A sixth group drew a distinction between co-operatives and communes on the basis that co-operatives involve only the partial socialization of economic activity and not the fusion of all economic effort into one collective enterprise. And so forth.

When we try to discern the meaning of the attributes just mentioned, and when we try to relate them with one another and with the phenomena of life, we are obliged to note that they are both variegated and contradictory. Many of these attributes are inapplic­able to whole classes of co-operatives, whose co-operative nature is intuitively not open to doubt nevertheless.

Thus at the present time, for example, it is extremely hard to find a co-operative which does not employ hired labour. Also, the traditional craft associations (arteli), as well as many agricultural co­operatives (such as those concerned with land improvement, with machines and with land cultivation), very often consist of exclusive groups which do not admit new members. It is not uncommon to find consumers' associations where membership is obligatory for entire categories of staff. Finally, those who work in co-operatives do not by any means always set themselves social goals, or if they do so, the aims are often sharply contradictory - as we can see, for example, from the religious type of peasant co-operatives in Belgium and in the socialist workers' co-operatives. Therefore, if our overriding purpose is to provide a definitive formula applicable to co­operatives of all kinds, we have to include the common character­istics found in all branches and those that can be regarded as essential.

Proponents of the theory of co-operatives do precisely this - by providing extremely short and abstract formulas. Immediately before

14 The Processes and the Concept of Vertical Concentration

our revolution of 1917, enormous importance was attached to these definitive, general formulas: they became the subject of violent disputes; and in our own literature, dozens of formulations were put forward.

For the sake of exemplification and comparison we will take two of the most vividly expressed and most sharply opposed formulations. Thus, for example, Tugan-Baranovskii defined co-operatives as follows:

A co-operative is an economic enterprise made up of several voluntarily associated individuals whose aim is not to obtain the maximum profit from the capital outlay but to increase the income derived from the work of its members, or to reduce the latter's expenditure, by means of common economic manage­ment. (M. Tugan-Baranovskii, Sotsial'no-ekonomicheskaya priroda kooperatsii [The Social and Economic Nature of Co­operation]).

The definition given by K. Pazhitnov sounds entirely different:

A co-operative is a voluntary association of some individuals which aims, by its joint efforts, to combat the exploitation by capital and to improve the position of its members through the production, exchange and distribution of economic benefits, that is, as producers, consumers or sellers of manpower. (K. Pazhitnov, Osnovy kooperatsii [The Foundations of Co­operation]).

All the other formulations repeated or developed those of Tugan-Baranovskii and Pazhitnov, or else tried to combine their ideas into a single formula.

When comparing the defining characteristics quoted above, we can therefore easily divide them into two groups: on the one hand, those of an organizational and formal nature (the role of capital, methods of distributing profits, forms of management, etc.); and on the other hand, those relating to social goals (destruction of the capitalist system, class harmony, liberation of the peasantry from economic bonds, etc.).

The question naturally arises as to whether it is possible to combine these two categories into a single definitive formula. And doubt may even arise as to whether these definitive features are concerned with one and the same phenomenon. Indeed, we are profoundly convinced that the attempt to define co-operatives involves not one but two things which have to be defined. On the one

The Processes and the Concept of Vertical Concentration 15

hand, we have a co-operative enterprise as an organizational-economic entity which may not set itself any social goals whatever; or which may even set itself social goals which run counter to those contained in the formulations enumerated above. On the other hand, we see before our eyes a widespread co-operative movement, or, more exactly, co-operative movements, each of which has its own particular ideology and which makes use of co-operative forms for the organization of economic enterprises, as one of the instruments (sometimes the only one), for its concrete embodiment. These latter movements consciously set themselves social goals of various kinds, and would be unthinkable without such goals.

Therefore, in our opinion, the concept of 'co-operatives' has to be broken down into two concepts: a 'co-operative enterprise' and a 'co­operative movement', and defining characteristics need to be formulated for each of them.

A 'co-operative enterprise' can be quite adequately described by a formal definition of the kind given by Tugan-Baranovskii. One can, in any case, find several typical organizational elements (such as the role of capital or the working people's social environment) which make it possible to provide a single definition for all co-operatives.

From the formal, organizational-economic point of view, the Belgian co-operative of the religious type - the first paragraph of whose statutes lays down that membership is open only to those who recognize 'the family, property and the Church as the only foundations of society' - and the communist co-operative associations of workers may be totally identical.

But without trying to provide a brief and an all-embracing formula, we might nevertheless deem it to be a characteristic feature of a co­operative enterprise that it can never be a self-centred enterprise having its own interests existing apart from those of the members who set it up. It is an enterprise which serves the interests of its clients who are also its proprietors and who organize its management in such a way that it is directly responsible to them and to them alone.

All the elements of the definition given by Tugan-Baranovskii and those like him logically stem from the idea we have formulated; and it really can be a feature common to all co-operative enterprises. But such a uniformity is hardly possible once we turn to the characteristics of co-operatives as a social movement.

It is true that, at first, when co-operatives represent primarily a movement based on literature and on ideas, such uniformity does exist. But as soon as the co-operative movement penetrates the thick of the national economy and becomes one of its essential foundations, class divisions and other contradictions begin to appear

16 The Processes and the Concept of Vertical Concentration

and the ideological mirage vanishes into thin air. An attentive observer will note the separate workers' co-operatives which regard themselves as a part of the general workers' movement; the burghers' urban co-operatives; the artisan co-operatives; and finally, peasant co-operatives. Each of them, in so far as they have really become part of life and have put down roots, are of the same flesh and blood as those social classes and groups which gave birth to them. And if, within the given group, there arises any kind of consciously conceived social movement of a class nature, then co­operatives are inevitably used as one of the elements of such a movement. Thus, for example, the labour movement has been reflected in three concrete forms: in a workers' party, in a trade union and in workers' co-operatives.

In Western Europe in the peasant milieu something like this can also be observed (in Belgium, Switzerland et al.) where alongside agricultural co-operatives, which are sharply differentiated from and hostile to workers' co-operatives, there exist parties which base themselves on the economic interests of the peasantry. Given such a state of affairs, it would be naive in the conditions of a class society to regard all types of co-operative movement as parts of a single, unified whole, and to subsume them under the nebulous general concept of 'the struggle for the interests of the working people'. From the scientific point of view this would mean abandoning depth and detail in social analysis; and from the political point of view it would mean ignoring those sometimes antagonistic class interests which ought to be identified in all their different meanings.

Therefore, from the social point of view, we should always speak not about the co-operative movement but about co-operative movements. And we are profoundly convinced that the same distinction should also be drawn in the organizational analysis of co­operative enterprises as such. While acknowledging that it is possible to provide a single definition of a co-operative enterprise, if this is approached from the formal, administrative point of view, we must nevertheless emphasize that because of its generality, it is devoid of specific content and therefore virtually useless.

In particular, in relation to agricultural co-operation, the common definition of the formal-organizational type totally leaves on one side the organizational-economic content which is involved in co-operative work as the result of the process which we have described as the vertical concentration of agriculture which assumes co-operative forms. Yet it is precisely this process of gradual concentration and regeneration of agricultural production which represents the essence of the matter for us, the organizers of the new agriculture. And what is important to us about agricultural producer co-operatives is

The Processes and the Concept of Vertical Concentration 17

precisely those elements which distinguish it from consumer co­operatives, and in no way the formal elements which they have in common. Nor should we forget that the social nature of co­operatives inevitably affects the specific economic tasks of a co­operative enterprise and, therefore, its organizational goals.

The organizational and economic bias of a co-operative enterprise is influenced to an important degree by the role in production or in commodity circulation which is played by its owner-members. What, indeed, can there be in common between a private shop and a similar co-operative shop staffed by the disabled, involving exactly the same commodity and similar technique, and often operating in the same neighbourhood? Of course, from a formal point of view, both economic enterprises are similar. But from the point of view of political economy they are of a nature which is not only different but antagonistic.

There is an even greater difference of organizational tendencies with regard to co-operative warehouses, let us say, for fruit and vegetables, depending on whether they are maintained by co­operatives of consumers or those of producers.

It must never be forgotten that in the conditions of a society which is alien to the planned organization of the state economy and to the state regulation of production and of the market, a co-operative represents an element, organized on collective principles, of an economic activity of a group of individuals; and that its purpose is to serve the interests of this group and of this group alone.

A workers' consumer co-operative represents organized purchas­ing activity on the part of the proletariat which has no interests apart from the interests of the proletarian class. Craftsmen's associations which handle raw materials have a point and purpose only in so far as they supply craftsmen with material for work. Peasant co-operatives, as we know, constitute a part of the peasant economy which has been given a distinct identity in order to organize that economy on large-scale principles.

In short, then, co-operatives cannot be thought of in isolation from the social and economic foundations on which they are based; and in so far as these foundations are economically diverse, the forms of co­operatives are themselves of diverse kinds.

Co-operatives organize those interests and aspects of the lives of groups or classes which already existed before co-operatives appeared; and at the early stages of the development of capitalist society, co-operatives did not introduce any new element which stands above class relations.

Thus peasant co-operatives in our opinion represent, in a highly perfected form, a variation of the peasant economy which enables

18 The Processes and the Concept of Vertical Concentration

the small-scale commodity producer to detach from his plan of organization those elements of the plan in which a large-scale form of production has undoubted advantages over production on a small scale - and to do so without sacrificing his individuality. He is able to organize them jointly with his neighbours so as to attain this large-scale form of production - while possibly employing hired labour.

Urban consumer co-operatives involve neither such a combination of households nor the rationalization of their productive activity. Their purpose is to co-ordinate the purchasing activities of their members and to organize a more rational expenditure by members of the income which they get from productive activity outside the co­operative.

Partnerships of craftsmen, artisans and traders do not constitute such an association of independent economic units, but usually represent a complete fusion within one enterprise of the working activities of their members; they are, therefore, better described as joint production rather than co-operation.

In order to bring this idea as sharply as possible into relief, we would like to focus the attention of the reader on four specific scenarios.

Scenario A would assume an ordinary butter manufacturing association of peasants in which the process of manufacturing and selling butter has been split off from the households and organized into a co-operative which has built a factory and hired workers to manufacture the butter. The co-operative produces butter from the milk supplied by its members and sells it to consumers. It is in a state of antagonistic relations (in the sense of opposing interests) both with the consumers and with its own workers (who produce the butter).

Let us now suppose that our co-operative is obliged for some reason to go into liquidation and that the workers who produce the butter buy the butter manufacturing factory and organize themselves into a workers' butter-producing partnership, the economic nature of which can be seen in scenario B. Here the co-operative buys the raw material (the milk) from the peasants and, having reprocessed it into butter, sells it to consumers, but comes into an antagonistic relationship both with them and with the peasants. The co-operative is guided by the will of the workers and it is the interests of their labour which it defends - not the labour interests of the peasant nor the interests of the urban consumer.

Let us then suppose that our workers' partnership is itself forced to close down and that the butter manufacturing factory is bought up by a consumers' association which has been formed in the town and which wishes to supply its members with cheap, good quality butter.

The Processes and the Concept of Vertical Concentration 19

Scenario C depicts the pattern of economic relationships in this new case of co-operative organization. The managerial power passes entirely out of the hands of the butter producers and is exercised from outside. The production of butter is organized on principles close to those of capitalism and is in an antagonistic relationship both with the peasants and with the workers.

Scenario D assumes the case where the factory passes into the hands of a private entrepreneur - let us say, one of the foremen who has enriched himself - who then organizes the enterprise solely according to his own will and is in an antagonistic relationship with all the other actors depicted in our scenarios.

Thus our factory has remained intact and has gone on working and has, from a technical point of view, remained just the same during all of the four phases of its existence. Nevertheless, in each of these four cases, different relationships arise between the actors depicted in the scenarios, even though they themselves have remained unchanged; and the economic nature of each of the four permutations differs greatly from that of the others. The interests being defended are also different. A peasant butter manufacturing association aims to sell milk at the highest possible price and to pay as few workers as possible. A workers' partnership {artel') receives a payment for its work which depends on the difference between a cheap purchase and a sale at a higher price. A consumers' society aims to obtain butter at the lowest possible price and therefore, so far as it can, it pushes down the payment for milk and for labour. This is identical to the aim of the capitalist who seeks, besides that, to obtain high selling prices for butter.

Thus it is that different kinds of co-operatives differ both in their nature and in their interests. Those who support the unity of the co­operative movement envisage the merger of the first three types -or at least of the first and third types - into a single enterprise. Is this possible?

The difference between these interests is so great that the very numerous attempts to achieve organizational mergers between different kinds of co-operatives with different class affiliations have usually resulted in failure and have raised questions as to whether an integrated co-operative movement is possible.

In one case, in a province on the middle Volga, an association of co-operatives emerged whose members in the south produced wheat and bought felt boots, while those in the north produced felt boots and bought wheat; and they conceived the idea of making an exchange between the co-operatives for the purpose of mutual advantage. Three years after this arrangement had begun, I had occasion to meet the leaders of the Association and to ask how this

20 The Processes and the Concept of Vertical Concentration

scheme was working out. 'Things are going well,' so I was told. 'We sell our felt boots in Moscow and buy our felt material in Kazan. We drive the wheat from the southern areas to Moscow and we make purchases for the northerners in Vyatka.' 'And what about exchanges between the co-operatives?' The person to whom I was talking merely waved his hand. It was quite clear that it was the actually existing combination which was the most advantageous.

I think that the case just described can to some extent provide an answer to the question whether an integrated co-operative produc­tion is possible.

It is possible for peasant and urban co-operatives not to be mutually hostile, to trade on a reciprocal basis and even to become unified at congresses and in organizations based on some common idea or financial principle. However, the interests that they defend are so much in conflict that they cannot be integrated within one single organization, for its will to exist is inevitably undermined by the inner contradictions between conflicting interests.

Such are the general considerations that compel us to acknow­ledge that agricultural co-operatives represent an economic pheno­menon which resembles other types of co-operative only in an outward and formal sense, but whose nature differs from them profoundly and therefore needs to be made the subject of a separate study.

It must be emphasized that everything set out above was discussed from the point of view of the national economy of a capitalist society.

Having outlined our categories, we now come to the central and most important set of questions of the present time:

1. What are the internal changes which will be required in the processes of the vertical concentration of agriculture, particularly in its co-operative forms, when the regime of a capitalist society is replaced by a transitional system of state capitalism and, after that, by a regime of socialist organization of production?

2. Do we, in our present-day organizational work in relation to the peasant economy, need methods of vertical concentration and, if so, in what forms?

It is not very difficult to answer the second of these questions.

Inasmuch as the gaining of organizational control over the processes of agricultural production is possible only by replacing the diffuse peasant economy by forms of concentrated production, we must in every way develop those processes of rural life which lead towards such concentration.

The path of horizontal concentration, with which we usually

The Processes and the Concept of Vertical Concentration 21

associated the notion of large-scale forms of production in agriculture in a country consisting of small peasant households, was thought of, from an historical point of view, in terms of the spontaneous differentiation of peasant households. Among these, the poorest would turn into the proletarian workforce, while the middle peasants would fall away, production becoming concentrated among the prosperous groups who organize it on capitalist principles and recruit hired labour. This process was bound to lead to the gradual creation of large-scale and technically quite well-organized enterprises which, at the time of formation of a socialist economy, could be nationalized and turned into grain and meat factories.

But it can easily be understood that in the context of Soviet rural policy with its Land Code of 1924 and its general regime of land nationalization, this path is totally out of the question. The proletarianization of the peasantry cannot in any circumstances be a part of Soviet policy. During the course of the revolution we were, indeed, not only unable to concentrate scattered areas of land into large-scale production units, but were obliged to break up a considerable part of the old, large-scale estates.2 It follows from this that the only form of horizontal concentration which can at the present time occur and actually be achieved is the concentration of peasant land-holdings into large-scale production units in the form of agricultural collectives of various kinds, in the form of agricultural communes, partnerships and associations for joint cultivation of the land - since they are, of course, based on peasant land and not on the old estates.

This process, as we shall see below, is occurring on a considerable scale; but it is not taking place, nor can it take place, on the scale needed for an overall policy aimed at the concentration of agricultural production. Therefore, the most important means of achieving concentration of peasant households has to be one of vertical concentration. It must take co-operative forms, since only in these forms will it be organically linked with agricultural production and capable of acquiring the necessary depth. In other words, the only path which is possible under our conditions for introducing into the peasant economy elements of a large-scale economy, of industrializa­tion and of state planning, is the path of co-operative collectivization, the gradual and consecutive separation of particular sectors of specialization from individual households and their organization as public enterprise.

When understood in the way just set out, agricultural co-operation becomes practically the only method of bringing our agriculture into the system that exists in the USSR. And this, at the present time, represents our basic task.